06
TIME AND A PLACE MARKET • DEMAND FOR STORAGE TERMINAL CAPACITY IS IN A STATE OF FLUX AS AN UNPRECEDENTED SERIES OF EXTERNAL INFLUENCES IMPACT CONSUMPTION AND TRADE
products, as well as chemicals, and have had an impact on storage demand. They are one of the factors behind Vopak’s reports over the course of 2019 of weak demand at its major oil hub in Singapore.
The construction and operation of bulk liquids storage terminals is a capital-intensive business; it is by nature based on long-term planning and market expectations, ideally underpinned by customer commitments. As such, it is difficult to respond quickly to changes in the market and, at a time of uncertainty and volatility around the world, terminal operators are facing difficult choices. Those changes can come on quite suddenly; earlier this year, for instance, the Coronavirus outbreak in China prompted many in the country to avoid travelling, leading to a sharp reduction in transport fuel demand with its knock-on effect on domestic refiners, the
The ‘IMO 2020’ rule mandating a reduction in sulphur oxide emissions from ships’ exhausts as from 1 January 2020 caused more issues, although at least this had been foreseen. It required terminal operators to make changes to their facilities in order to be able to handle and segregate different grades of fuel, which necessitated taking some tanks out of service for modification at those terminals handling bunker fuels. As a result, some terminal operators have reported a decline in overall occupancy rates for 2019 compared to 2018. Other comparatively short-term impacts have been generated by growing geopolitical
THE BIG PICTURE Other factors impinging on the pattern of demand for tank storage capacity are associated with longer-term external influences, such as the shift in refinery capacity towards the east and rapid increases in end-user consumption in Asia and other emerging markets, at a time when the mature markets in Europe and North America are not showing any meaningful growth. Terminal operators have had to find ways to deal with those structural changes; in some cases, as with Vopak, that has involved the disposal of sites that no longer fit the global strategy, even if local players can find a role for them. It has also led to investment in new, large-scale facilities both to handle the surge in local demand – as in Brazil, Mexico and China – and the new global flows
tanker market and terminal operators.
tensions and the imposition of tariffs and other sanctions, not least the trade war between the US and China but also US sanctions on Iran, Venezuela and other countries seen as hostile to US interests around the world. These have led to shifts in the pattern of trade for crude oil and refined
of product, which is continuing in Malaysia (as an alternative to Singapore, where land is in short supply) and Panama. Perhaps the most surprising aspect of this is that the rapid increase in the production of crude oil and natural gas in North America has had an impact limited largely to exports
ANTWERP IS THE FOCUS OF MUCH OF THE INTEREST IN EUROPEAN STORAGE TERMINALS
HCB MONTHLY | MARCH 2020
